Highlights of the federal budget
Canada Growth Incentive (CGI) – Capital Gains Exemption and Rollover for Investments in Small Businesses
Budget 2026 proposes to introduce a new CGI capital gains exemption which would allow a Canadian-resident individual of at least 18 years old to claim a tax exemption on capital gains realized on the disposition of qualifying shares of a qualifying corporation, up to a $15-million limit. This measure would apply in respect of qualifying shares of a qualifying corporation issued on or after Budget Day and before 2037.
T1 Income Tax Return Filing and Balance-Due
Budget 2026 proposes to change the T1 filing and balance-due dates to May 15 for all individuals, including self-employed individuals and their spouses or common-law partners. These measures would apply to the 2027 and subsequent taxation years.
Instalment Payments for Individuals and Corporations
Budget 2026 proposes to increase the instalment thresholds and index them to inflation. It proposes to increase the threshold from $3,000 to $7,500 for corporations and individuals residing outside Quebec, and from $1,800 to $4,500 for individuals residing in Quebec. In addition, the budget proposes to simplify the instalment regime for self-employed business owners, including by allowing them to make a single payment of two thirds of their net tax owing by December 31. These measures would apply to 2028 and subsequent taxation years.
Expansion of the Intergenerational Farm and Fishing Property Rollover
Budget 2026 proposes to expand the rollover so that it is available for transfers to a niece, nephew, grandniece, or grandnephew of the taxpayer or the taxpayer’s spouse or common-law partner. This measure would be effective for transfers that occur on or after January 1, 2027.
Canada Caregiver Credit (CCC)
The CCC is a non-refundable tax credit that recognizes the impact of non-discretionary, out-of-pocket expenses on a caregiver’s ability to pay tax. Budget 2026 proposes to make the CCC refundable to ensure that eligible caregivers can receive the full amount even if they have little or no tax liability. This measure would apply to the 2027 and subsequent taxation years.
Medical Expense Tax Credit (METC) and Disability Supports Deduction (DSD)
Budget 2026 proposes various modifications to the METC and the DSD, including:
- To remove the requirement for a prescription for certain expenses that are incurred exclusively for medical purposes.
- To replace the prescription requirement with a requirement that an authorized medical practitioner certify the individual’s medical condition for certain expenses that may be incurred for non-medical purposes.
Under the current rules, individuals need to track their expenses and keep receipts to claim the METC and DSD. Budget 2026 proposes to allow individuals to claim an optional flat amount in respect of the following categories of expenses: gluten-free food expenses (applicable for the 2026 and subsequent taxation years), incontinence product expenses and service dog expenses (applicable for the 2027 and subsequent taxation years).
Registered Disability Savings Plan (RDSP)
Budget 2026 proposes to permanently allow, as of January 1, 2027, a qualifying family member to open an RDSP on behalf of an adult whose ability to enter into a contract for an RDSP is in doubt, and who does not have a legal representative. A qualifying family member may be a parent, spouse or common-law partner, or sibling.
Optional Flat Amounts for Personal Income Tax
To reduce the need for individuals to keep receipts and itemize their expenses to support their amounts claimed, Budget 2026 proposes optional flat-amount calculation methods for certain deductions and credits, including: moving expense deduction, clergy residence deduction, labour mobility deduction for tradespeople, home accessibility tax credit, and adoption expense tax credit. These measures would apply to the 2027 and subsequent taxation years.
Deductibility of Expenses Against Commission Income
Budget 2026 proposes to eliminate an unnecessary rule that reduces the amount of travel expenses that commission employees can deduct for work if they choose to claim certain other expenses they incur to earn commission income. This measure would apply to the 2027 and subsequent taxation years.
Mineral Exploration Tax Credit (METC) and Critical Mineral Exploration Tax Credit (CMETC)
The METC is equal to 15% of the specified mineral exploration expenses incurred in Canada and renounced to flow-through share investors. The CMETC is equal to 30% of specified critical mineral exploration expenses incurred in Canada and renounced to flow-through share investors. The METC and the CMETC are both set to expire on March 31, 2027.
Budget 2026 proposes to extend eligibility for the METC and CMETC for five years, to flow-through share agreements entered into, on or before March 31, 2032.
Foreign Income Verification Statement – Form T1135
Budget 2026 proposes to increase the threshold above which Form T1135 must be filed from $100,000 to $200,000. Form T1135 currently provides a simplified reporting method if the total cost of a taxpayer’s specified foreign property is less than $250,000 throughout the year. The Canada Revenue Agency (CRA) would also increase the threshold for simplified reporting from less than $250,000 to less than $500,000. These measures would apply to taxation years or fiscal periods that end after 2026.
Extend the Timeframe to File a Notice of Objection
Budget 2026 proposes, for most taxpayers, to amend the deadline to file a notice of objection to an income tax assessment to one year after the day the notice of assessment is sent. Consequently, the ability to apply for an extension of time to file a notice of objection would be eliminated. This amendment would apply to assessments sent on or after the day that is three months after royal assent.
Registered Retirement Savings Plan
Budget 2026 announces the government’s intention to merge the tax rules applicable to RRSPs and RRIFs, introducing an “RRSP-for-life.” This would eliminate the need to convert an RRSP to a RRIF at age 71. It would also allow a surviving spouse or partner to become a successor holder of an RRSP (if applicable) and simplify tax-free transfers to qualified survivors after the death of the account holder. This would not change minimum withdrawal requirements after age 71. A consultation to such effect is announced and written representations can be made up to January 8, 2027.
Individual Pension Plans (IPP)
Budget 2026 proposes to apply modifications to IPPs, including subjecting them to the same advantage rules, non-qualified investment rules, and prohibited investment rules that currently apply to other registered plans of controlling individuals. This measure would apply as of January 1, 2028. Transitional rules would apply to investments acquired before 2028 that become non-qualified or prohibited on January 1, 2028.
Other measures
Corporate Loss Transfers
Budget 2026 invites stakeholders to comment on the introduction of a corporate loss transfer rule and consider concerns identified in previous consultations regarding tax integrity and protecting the provincial and territorial tax bases. This mechanism would allow the transfer of current-year non-capital losses between corporations under certain conditions.
Taxable Canadian Property (TCP)
Canada generally taxes non-residents on their income and gains from the disposition of TCP. A purchaser must generally withhold 50% of the purchase price for specified TCP and 25% for capital property other than specified TCP. Budget 2026 proposes to reduce the withholding and remittance rates from 25% and 50% to 15% and 30%, respectively for dispositions by corporate vendors. Further, the Vendor’s tax remittance for issuance of a clearance certificate is reduced from 25% of the capital gain to 15% of the capital gain. The budget proposes to exempt vendors and purchasers from the withholding and tax remittance requirements for fully tax-deferred section 85 rollovers of TCP in certain circumstances. This measure would apply to dispositions occurring on or after January 1, 2027.
Trust Distributions to Non-Residents
Budget 2026 proposes to broaden the current rollout denial rule to include indirect distributions of trust property to non-resident beneficiaries. The rollout would be denied for any property that is transferred to a corporation (or partnership) that has a direct or indirect non-resident shareholder (or partner). This measure would apply in respect of distributions of property that occur on or after Budget Day.
Administrative Penalties
Budget 2026 proposes to increase most penalties. The measures would apply to taxation years or fiscal periods ending after 2027.
Canada Deposit Insurance
Budget 2026 proposes to modernise the deposit insurance framework by amending the Canada Deposit Insurance Corporation Act, including to increase the deposit insurance limit to $250,000, provide temporary high-balance coverage for certain life events, such as the sale of a home, and remove the limit for eligible deposits in registered and tax-free accounts.